Justice Dept. joins FTC’s ‘pay-for-delay’ antitrust complaint

“Pay-for-delay” transactions reportedly cost consumers more than $3 billion each year in higher drug costs.

The Puerto Rico Justice Department has joined 19 other U.S. jurisdictions in an antitrust case filed by the Federal Trade Commission aimed at fighting monopolistic practices within the pharmaceutical industry that reportedly cost consumers about $3.5 billion per year in the form of higher drug prices.

The local agency got involved in the case after being invited by the State of New York, which filed a petition to intervene as “amicus curiae” in the FTC vs. Watson Pharmaceuticals case that questions a practice known as “pay-for-delay” through which a pharmaceutical company will pay companies producing bioequivalent (generic) medications to delay marketing them in cases where the patent validity is challenged in court.

That way, they can continue to charge higher prices than they could if competitors were allowed to sell generic versions of the drug.

“In that manner, the pioneer company is usually able to recoup its investment and gain a profit, sometimes a super-sized one,” said Findlaw.com in an assessment of the case. “The system of developing new drugs in this country exemplifies the maxims ‘no risk, no reward’ and ‘more risk, more reward.’ Developing new drugs is a risky, lengthy, and costly endeavor, but it also can be highly lucrative.”

This case dates to February 2009, when the FTC filed a complaint in the U.S. District Court for the Central District of California challenging agreements in which Solvay Pharmaceuticals Inc. paid generic drug makers Watson Pharmaceuticals Inc. and Par Pharmaceutical Companies Inc. to delay generic competition to Solvay’s branded testosterone-replacement drug AndroGel, a prescription pharmaceutical with annual sales of more than $400 million.

“At a time of escalating health care costs, these unlawful agreements deny patients the benefit of competition between branded and generic pharmaceuticals and ultimately cost consumers hundreds of millions of dollars a year,” said Acting FTC Bureau of Competition Director David P. Wales, at the time of the filing.

According to the FTC’s complaint, Watson and Par, via its partner Paddock Laboratories, each sought regulatory approval from the FDA to market generic versions of AndroGel.

Significant pay-offs
In their FDA filings, both companies certified that their products did not infringe the only patent Solvay had relating to AndroGel, and that the patent was invalid. The complaint charges that Solvay agreed to pay the generic companies to abandon their patent challenges and agree not to bring a generic AndroGel product to market for nine years, until 2015.

The agency claimed Solvay paid between $31 million and $42 million a year to preserve its annual profits estimated at $125 million, according to Reuters.

The Court’s ruling will likely resolve the case that has split the federal courts and which the FTC has pursued for more than a decade, said legal firm McDermott, Will and Emery in a recent article published in www.mondaq.com.

“These transactions cost huge sums of money to consumers, since large pharmaceutical companies seek to keep generics out of the market,” said Alvarado- Rivera. “The FTC estimates that these transactions cost the consumer more than $3 billion each year.”

“U.S. jurisdictions and the Commonwealth of Puerto Rico have a strong interest in protecting its consumers, while seeking to reduce their investments in medicines and protect the health of the population,” he added.

Only one in every 5,000 medicines tested for the potential to treat illness is eventually approved for patient use, and studies estimate that developing a new drug takes 10 to 15 years and costs more than $1.3 billion, Findlaw.com said.

More states are expected to join the case before the Jan. 28 deadline, local agency representatives said.